U.S. based airlines and has renewed this coverage on a periodic basis. The current war-risk policy is effective until MarchAugust 31, 20092010 and covers losses to employees, passengers, third parties and aircraft. The Secretary of Transportation may extend this coverage until May 31, 2009. If the U.S. government does not extend this coverage beyond MarchAugust 31, 2009,2010, obtaining comparable coverage from commercial underwriters could result in substantially higher premiums and more restrictive terms, if it is available at all. See “Increases in insurance costs or reductions in insurance coverage may adversely impact the Company’s operations and financial results” in Item 1A,Risk Factors, below.

General. All carriers engaged in air transportation in the U.S. are subject to regulation by the DOT. Among its responsibilities, the DOT issues certificates of public convenience and necessity for domestic air transportation (no air carrier, unless exempted, may provide air transportation without a DOT certificate of public convenience and necessity), grants international route authorities, approves international code sharecodeshare agreements, regulates methods of competition and enforces certain consumer protection regulations, such as those dealing with advertising, denied boarding compensation and baggage liability.

Airlines also are regulated by the Federal Aviation Administration (“FAA”), a division of the DOT, primarily in the areas of flight operations, maintenance and other safety and technical matters. The FAA has authority to issue air carrier operating certificates and aircraft airworthiness certificates, prescribe maintenance procedures and regulate pilot and other employee training, among other responsibilities. From time to time, the FAA issues rules that require air carriers to take certain actions, such as the inspection or modification of aircraft and other equipment, that may cause the Company to incur substantial, unplanned expenses. The airline industry is also subject to various other federal laws and regulations. The U.S. Department of Homeland Security (“DHS”) has jurisdiction over virtually all aspects of civil aviation security. SeeLegislation, below. The U.S. Department of Justice (“DOJ”) has jurisdiction over certain airline competition matters. The U.S. Postal Service has authority over certain aspects of the transportation of mail. Labor relations in the airline industry are generally governed by the Railway Labor Act (“RLA”). The Company is also subject to inquiries by the DOT, FAA and other U.S. and international regulatory bodies.

Airport Access. Access to landing and take-off rights, or “slots,” at several major U.S. airports and many foreign airports served by United are, or recently have been, subject to government regulation.

In 2008, the FAA issued new rules related to slots at the three New York City-area airports named above. These rules provide for

Legislation. The airline industry is also subject to legislative activity that canmay have an impact on operations and costs. Specifically, the law that authorizes federal excise taxes and fees assessed on airline tickets expired in September 2007 wasbut has been extended to February 28, 2008,multiple times and has most recently been extended again until March 31, 2009.2010. In addition to federal, state and local taxes and fees that the Company is currently subject to, proposed taxes and fees are currently pending that may increase the Company’s operating costs if imposed on the Company. Congress is currently attempting to pass comprehensive reauthorization legislation to impose a new funding structure and make other changes to FAA operations. Past aviation reauthorization bills have affected a wide range of areas of interest to the industry, including air traffic control operations, capacity control issues, airline competition issues, aircraft and airport technology requirements, safety issues, taxes, fees and other funding sources. There also exists the possibility that Congress may also pass other legislation that could increase labor and operating costs. Legislation is expected to focus on outsourced maintenance, Family and Medical Leave Act changes and other work rules. Climate change

legislation, which would regulate green-housegreenhouse gas emissions, is also likely to be a significant area of legislative and regulatory focus and could adversely impact fuel costs. SeeEnvironmental Regulation, below.

Customer service issues have remained active areas for both Congress and DOT regulators during 2008.2009. In addition to DOT-proposedDOT customer service regulations discussed above, additional regulations or legislation imposing more specific customer service requirements isare likely to be approved by Congress in 2009,2010, though what those requirements might be is unclear at this time. The DOT has also proceeded with other regulatory changes in this area, including proposals regarding treatment of and payments to passengers involuntarily denied boarding, domestic baggage liability proposals regarding flight delay reporting requirements and airline scheduling practices. Additionally, since September 11, 2001, aviation security has been and continues to be a subject of frequent legislative and regulatory action, requiring changes to the Company’s security processes and frequently increasing the cost of its security procedures.

General. International air transportation is subject to extensive government regulation. In connection with United’s international services, the Company is regulated by both the U.S. government and the governments of the foreign countries United serves. In addition, the availability of international routes to U.S. carriers is regulated by aviation agreements between the U.S. and foreign governments, and in some cases, fares and schedules require the approval of the DOTand/or the relevant foreign governments.

United’s ability to serve some foreign markets and expand into certain others is limited by the absence altogether of aviation agreements between the U.S. government and the relevant governments. Shifts in U.S. or foreign government aviation policies canmay lead to the alteration or termination of air service agreements. Depending on the nature of any such change, the value of United’s international route authorities and slot rights may be materially enhanced or diminished.

The U.S./EU open skies agreement became effective in March 2008. This agreement replaced the bilateral arrangements between the U.S. government and the 27 EU member states. Based on the U.S. open skies model, it provides U.S. and EU carriers with expansive rights that have increased competition in transatlantic markets. For example, U.S. and EU carriers now have the right to operate between any point in the U.S.United States and the EU. The Agreementagreement has no direct impact on airport slot rights nor does it provide for a reallocation of existing slots, including those at London Heathrow. London Heathrow currently remains subject to both slot and facility constraints.

Also in 2008, the EU adopted interpretive guidance and legislation that will impactimpacts the Company. The Commission has officially sanctioned secondary slot trading, a current practice among carriers that involves the sale, purchase or lease of slots. This action resolves disputes about the legality of slot exchanges at EU airports including London Heathrow.

In addition,December 2009, the EU has adopted legislationUnited States and Japan reached agreement on the text of an open skies agreement to include aviation withinreplace the EU’s existing greenhouse gas emissions trading scheme effective1952 bilateral agreement on air service between the United States and Japan. The open skies agreement is expected to enter into force in 2012. There are significant questions that remain asthe fall of 2010, subject to the legalitysatisfaction of applying the scheme to non-EU airlines and the U.S. and other governments are considering filing a legal challengecertain conditions precedent. Pursuant to the EU’s unilateral inclusion of non-EU carriers. While such a measure could significantly increase the costs of carriers operatingagreement, any U.S. or Japanese carrier will be able to fly between any point in the EU,United States and any point in Japan and, in the precise costcase of U.S. carriers, beyond Japan to Unitedpoints in other countries the carrier is difficultauthorized to calculate with certainty due to aserve. The agreement will also eliminate the restrictions on the number of variables,frequencies carriers can operate, and itrequire governments in both the United States and Japan to concur before taking action to regulate a carrier’s fares or rates.

Also in December 2009, United and Continental applied jointly with All Nippon Airways to the DOT for approval of, and immunity from U.S. antitrust laws for, a series of alliance agreements between and among the carriers, including a transpacific joint venture agreement. This application is not clear whether the scheme will withstand legal challenge.

The airline industry is subject to increasingly stringent federal, state, local and foreign environmental laws and regulations concerning emissions to the air, discharges to surface and subsurface waters, safe drinking water and the management of hazardous substances, oils and waste materials. New regulations surrounding the emission of greenhouse gases (such as carbon dioxide) have been adopted and are otherwise being considered for promulgation both internationally and within the United States.States (which is discussed further below). United is carefully evaluating the potential impact of such new and proposed regulations. Other areas of developing and/or new regulations include the State of California rule-makings regarding air emissions from ground support equipment and a federalrule-making rule-makings concerning the discharge of deicing fluid. fluid and the regulation of aircraft drinking water supplies.

Future environmental regulatory developments, such as in regard to climate change, in the United States and abroad, could adversely affect operations and increase operating costs in the airline industry. Some climate change laws and regulations that have gone into effect apply to United, including environmental taxes for certain international flights (including the United Kingdom’s Air Passenger Duty), limited greenhouse gas reporting requirements and land-based planning laws which could apply to airports and could affect airlines in certain circumstances. In addition, a 2009 EU Directive required EU member countries to enact legislation that would include aviation within the EU’s existing carbon emissions trading scheme, effective in 2012. The legality of applying such a scheme to non-EU airlines has been widely questioned. In December 2009, the Air Transportation Association, joined by United, Continental and American Airlines, filed a lawsuit in the United Kingdom challenging regulations that transpose into UK law the EU emissions trading scheme as applied to U.S. carriers. In addition, non-EU countries are considering filing a formal challenge before the United Nations’ International Civil Aviation Organization with respect to the EU’s inclusion of non-EU carriers. It is not clear whether the trading scheme will withstand such challenges. If the scheme is found to be valid, however, it could significantly increase the cost of carriers operating in the EU (by requiring the purchase of carbon credits), although the precise cost to United is difficult to calculate with certainty due to a number of variables and will depend, among other things, on United’s carbon emissions from flights to and from the EU and the price of carbon credits. The precise nature of any such requirements and their applicability to United are difficult to predict, but the impact to the Company and the aviation industry would likely be adverse and could be significant, including the potential for increased fuel costs, carbon taxes or fees, or a requirement to purchase carbon credits.

The airline industry is also subject to other environmental laws and regulations, including those that require the Company to remediate soil or groundwater to meet certain objectives. Compliance with all environmental laws and regulations can

As of December 31, 2008,2009, the Company and its subsidiaries had approximately 50,00047,000 active employees, of whom approximately 83%82% were represented by various U.S. labor organizations. The employee groups, number of employees and labor organization for each of United’s collective bargaining groups were as follows:

Collective bargaining agreements are negotiated under the RLA, which governs labor relations in the air transportation industry, and such agreements typically do not contain an expiration date. Instead, they specify an amendable date, upon which the contract is considered “open for amendment.” Contracts remain in effect while new agreements are negotiated. During the negotiation period, both the Company and the negotiating union are required to maintain the status quo. The

During the second quarter of 2009, the Company plans to beginbegan negotiations with its labor groupsunions as all of United’s domestic labor contracts became amendable during January 2010. Consistent with its contractual commitments, United served “Section 6” notices to all six of its labor unions in April 2009 to commence the collective bargaining process. In August 2009, United filed for mediation assistance in conjunction with three of its six unions–the Air Line Pilots Association (“ALPA”), Association of Flight Attendants–Communication Workers of America (“AFA”) and the International Association of Machinists and Aerospace Workers (“IAM”). In January 2010, the Company also filed for mediation assistance in conjunction with another of its unions, Professional Airline Flight Control Association (“PAFCA”). These filings were consistent with commitments contained in current labor contracts which provided that the parties would jointly invoke the mediation services of the National Mediation Board (“NMB”) in the event agreements had not been reached by August 1, 2009.

The following risk factors should be read carefully when evaluating the Company’s business and the forward-looking statements contained in this report and other statements the Company or its representatives make from time to time. Any of the following risks could materially adversely affect the Company’s business, operating results, financial condition and the actual outcome of matters as to which forward-looking statements are made in this report.

The Company’s Amended and Restated Revolving Credit, Term Loan and Guaranty Agreement, dated as of February 2, 2007 with JPMorgan Chase Bank, N.A, Citicorp USA, Inc., J.P. Morgan Securities Inc., Citigroup Global Markets, Inc. and Credit Suisse Securities (USA) LLC (the “Amended Credit Facility”) after prepaying $972 million, and the Company’s indentures governing the 9.875% Senior Secured Notes due 2013 and 12.0% Senior Second Lien Notes due 2013 (together, the “Senior Notes”) impose certain operating and financial covenants on the Company and its subsidiaries.

Among other covenants, the terms of its then outstanding credit facility debt. the Amended Credit Facility require the Company to maintain:

The Amended Credit Facility requires compliance with certain covenants, which were further amended in May 2008. A summary of the current financial covenants includes the following:

Among other covenants, the indentures governing the Senior Notes contain covenants related to meet thisthe collateral, including covenants requiring United, subject to certain exceptions, to maintain ownership of the collateral and to calculate the priority lien debt value ratio was suspended for the four quarters beginning with the second quarter of 2008or secured debt value ratio, as applicable, and ending with the first quarter of 2009, but such requirement resumes beginning in the second quarter of 2009. The required ratio for the periods ended June 30, 2009, September 30, 2009 and December 31, 2009 shall be computed based on three months ended June 30, 2009, the six months ended September 30, 2009 and the nine months ended December 31, 2009, respectively; and, the required ratio in subsequent quarters shall be computed based on the twelve months preceding each quarter-end. The Company must alsoto maintain a minimum unrestricted cash balancepriority lien debt value ratio or minimum secured debt value ratio, as applicable, as of $1.0 billion at any time.

certain reference periods. If the value of the Company’s collateral underlying the Senior Notes declines, the Company may be required to provide the debtholders with additional collateral in order to avoid a default and a subsequent acceleration of the applicable debt obligations.

The Company’s ability to comply with any applicablethe covenants in effect for any reporting period could result in a default under the Amended Credit Facility. Additionally, the Amended Credit Facility contains across-default provision with respect to other credit arrangements that exceed $50 million. Althoughor the Company was in compliance with all required financial covenants as of December 31, 2008, andindentures governing the Company is not required to comply with a fixed charge coverage ratio until the three month period ending June 30, 2009, continued compliance depends on many factors, some of which areSenior Notes may be affected by events beyond the Company’sits control, including the overall industry revenue environment and the level of fuel costs. There are no assurancescosts, and it may be required to seek waivers or amendments of covenants or alternative sources of financing. The Company cannot provide assurance that such waivers, amendments or alternative financing could be obtained or, if obtained, would be on terms acceptable to the Company will continue to comply with itsCompany.

A breach of certain of the covenants or restrictions contained in the Company’s Amended Credit Facility covenants. Failureor indentures governing the Senior Notes could result in a default. The Amended Credit Facility and the indentures governing the Senior Notes contain a cross-default provision with respect to comply with applicable covenantsfinal judgments that exceed $50 million and $70 million, respectively. In addition, the indentures governing the Senior Notes contain a cross-default provision where a default resulting in any reporting period wouldthe acceleration of indebtedness under the Amended Credit Facility could result in a default under the indentures. A default under the agreements could allow the Company’s debtholders to accelerate repayment of the obligations in these agreements and/or to declare all borrowings outstanding thereunder to be due and payable. If the Company’s debt is accelerated, its assets may not be sufficient to repay the obligations in the Amended Credit Facility which could have a material adverse impact onand the Company depending on the Company’s ability to obtain a waiver of, or otherwise mitigate, the impact of the default.

The Company has agreements with financial institutions that process customer credit card transactions for the sale of air travel and other services. Under certain of the Company’s card processing agreements, the financial institutions either require, or have the right to require, that United maintain a reserve equal to a portion of advance ticket sales that have been processed by that financial institution, but for which the Company has not yet provided the air transportation (referred to as “relevant advance ticket sales”). As of December 31, 2008,2009, the Company had total advance ticket sales of approximately $1.5 billion, of which approximately $1.3 billion relates80% related to credit card sales.

The Company’s credit card processing agreement with Paymentech and JPMorgan Chase Bank, (the “Amendment”) that suspends until January 20, 2010 the requirement for United to maintain additional cash reserves with this processor of bank cards (above the currentN.A. contains a cash reserve of $25 million at December 31, 2008) if United’s month-end balance of unrestricted cash, cash equivalents and short-term investments falls below $2.5 billion.requirement. In exchange for this benefit, United has granted the processor a security interest in certain of United’s owned aircraft with a current appraised value of at least $800 million. United also has agreed that such security interest collateralizes not only United’s obligations under the processing agreement, but also United’s obligations under United’s Amended and Restated Co-Branded Card Marketing Services Agreement. United has an option to terminate the Amendment prior to January 20, 2010, in which event the parties’ prior credit card processing reserve arrangements under the processing agreement will go back into effect.

Based on the November 2008 Amendment had not been in effect as ofCompany’s December 31, 2008,2009 unrestricted cash balance, the Company would have beenwas not required to post an additional $132provide cash collateral above the current $25 million of reserves based on an actual unrestricted cash, cash equivalents and short-term investments balance of between $2.0 billion and $2.5 billion at December 31, 2008.

United entered into a new agreement with American Express expired on February 28, 2009 and was replaced by a new agreement on March 1, 2009 which haswith an initial five year term. As of December 31, 2008, there were no required reserves under this card agreement, and no reserves were required up through the date of expiration.

The new agreement with American Express permits the Company to provide certain replacement collateral in lieu of cash collateral, as long as the Company’s unrestricted cash is above $1.35 billion. Such replacement collateral may be pledged for any amount of the required reserve up to the full amount thereof, with the stated value of such collateral determined according to the agreement. Replacement collateral may be comprised of aircraft, slots and routes, real estate or other collateral as agreed between the parties.

An increase in the future reserve requirements as provided by the terms of either, or both, of the Company’s material card processing agreements could materially reduce the Company’s liquidity.

While the Company’s cash flows from operations and its available capital have been sufficient to meet its current operating expenses, lease obligations and debt service requirements to date, the Company’s future liquidity could be negatively impacted by many factors including, but not limited to, substantial volatility in the price of fuel, declines in passenger and cargo demand associated with the weak global economyrecession and deterioration of global financial systems.systems, and any of our future commitments for the purchase of aircraft. During 2008 particularly in the fourth quarter,and 2009, the Company experienced weakerreduced demand for its services due to the current economic conditions.weak global economy. Decreases in passenger and cargo demand resulting from a weak global economy have resulted in both lower passenger volumes and lower ticket fares, which have adversely impacted our liquidity and are expectedmay continue to adversely impact our results of operations and liquidity in 2009.2010. In addition, the Company’s capacity cuts completed in 2008 and planned 2009 capacity cuts may not be sufficient to address lower demand from adue to the weak global economy. See the risk factor entitled “Economic and industry conditions constantly change and continued or worsening negative economic conditions in the United States and elsewhere may have a material adverse effect on our business and results of operations,” below, for further discussion of the adverse impacts of athe weak economy on our operations.

In 2008, fuel price changes had a more significant impact on liquidity than changes in demand for the Company’s products and services. For example, the crude oil spot price rose to a record high of approximately $145 per barrel in July 2008. The Company’s consolidated fuel cost, including the impact of fuel hedges, increased by more than $3.1 billion for the full year of 2008 as compared to 2007 primarily due to increased fuel prices, resulting in a significant negative impact on liquidity. Furthermore,addition, fuel prices continue to be extremely volatile which may negatively impact the Company’s liquidity. Additionally,liquidity in the future. Certain of the Company’s fuel hedges require that it post cash collateral with applicable counterparties if crude oil prices change by specified amounts.fall below certain prices. The Company provided cash collateral of

The Company’s current plans to address increased and volatile fuel prices and the weak global economy may not be successful in improving its results of operations and liquidity. In addition, the implementation of certain of these

plans requirerequires the use of cash for such items as severance payments, lease termination fees conversion of Ted aircraft and facility closure costs, among others. These cash requirements will reduce the Company’s available cash available for its ongoing operations. In addition, the economic downturn may have an adverse impact on travel demand, which may result in a negative impact on revenues and liquidity.

As described above, the Company is required to comply with certain financial covenants under its Amended Credit Facility, the indentures governing the Senior Notes and certain of its credit card processing agreements. The factors noted above, among other things, may impair the Company’s ability to comply with these covenants or could allow certain of our credit card processors to increase the required reserves on our advance ticket sales, which could have an adverse impact on the Company’s financial position and liquidity, depending on its ability to obtain a waiver of, or otherwise mitigate, the impact of the default. If a default occurs under our Amended Credit Facility and the indentures governing the Senior Notes, the cost to cure any such default may adversely impact our financial position and liquidity.

In addition, the Company’s indebtedness at December 31, 2009 was secured by collateral with a net carrying value of $8.0 billion. As a result, we may have limited remaining assets available as collateral for loans or other indebtedness, which may make it difficult to raise additional capital to meet our liquidity needs. Our level of indebtedness, our non-investment grade credit rating and the current unfavorable credit market conditions may also make it difficult for us to raise capital to meet liquidity needs and may increase our cost of borrowing. A higher cost of capital could negatively impact our results of operations, financial position and liquidity.

See Item 7,Management’s Discussion and Analysis of Financial Condition and Results of Operations,for further information regarding the Company’s liquidity.

Our business and results of operations are significantly impacted by general economic and industry conditions. Industry-wide passenger air travel varies from year to year. Robust demand for our air transportation services depends largely on favorable general economic conditions, including the strength of the global and local economies, low unemployment levels, strong consumer confidence levels and the availability of consumer and business credit. For leisure travelers, air transportation is often a discretionary purchase that those consumers can eliminate from their spending in difficult economic times. In addition, during periods of poor economic conditions, businesses usually reduce the volume of their business travel, either due to cost-savings initiatives or as a result of decreased business activity requiring travel. The overall demand for air transportation in the U.S.United States has been negatively impacted bydecreased due to adverse changes and continued deterioration in the health of the U.S. and global economies, which has negatively impacted our results of operations for the yearyears ended December 31, 2009 and 2008, and couldmay continue to have a significant negative impact on our future results of operations for an extended period of time. Since the end of 2008, the outlook for keyWhile some economic indicators has deteriorated and credit card activity and advance bookingslike the GDP are beginning to exhibit growth, other economic indicators that affect air travel such as unemployment have not been as strong as in the prior year. These factors are expectedyet begun to negatively impact the Company’s 2009 passengerrecover and cargo revenues.may not do so for an extended period of time. In addition, decreases in cargo revenues due to lower demand have a disproportionate impact on our operating results as our cargo revenues generally have higher margins as compared to our passenger revenues. Continuation or worsening of the current global recession may lead the Company and other carriers to further reduce domestic or international capacity and may have a material adverse effect on the Company’s revenues, results of operations and liquidity.

The Company’s operating results have been, and could continue to be, significantly impacted by changes in the supply or price of aircraft fuel, both of which are impossible to predict. The record-high fuel prices each year from 2005 through 2007 increased further in 2008 to new record highs with the crude oil spot price reaching highs of approximately $145 per barrel in July of 2008. At times, United has not been able to increase its fares when fuel

prices have risen due to the highly competitive nature of the airline industry, and itindustry. United may not be able to do soincrease its fares if fuel prices rise in the future and any such increases may not be sustainable in the highly competitive environment. In addition, fare increases may not totally offset the fuel price increase and may also reduce demand for air travel. From time to time, the Company enters into hedging arrangements to protect against rising fuel costs. The Company’s hedging programs may use significant amounts of cash due to posting of cash collateral in some circumstances, may not be successful in controlling fuel costs and may be limited due to market conditions and other factors. See Note 13,12, “Fair Value Measurements and Derivative Instruments,” inCombined Notes to Consolidated Financial Statements the Footnotes for additional information on the Company’s hedging programs.

The terrorist attacks of September 11, 2001 involving commercial aircraft severely and adversely impacted the Company’s financial condition and results of operations, as well as prospects for the airline industry generally.industry. Among the effects experienced from the September 11, 2001 terrorist attacks were substantial flight disruption costs caused by the FAA-imposed temporary grounding of the U.S. airline industry’s fleet, significantly increased security costs and associated passenger inconvenience, increased insurance costs, substantially higher ticket refunds and significantly decreased traffic and passenger revenue per revenue passenger mile (“yield”).

Additional terrorist attacks, even if not made directly on the airline industry, or the fear of or the precautions taken in anticipation of such attacks (including elevated national threat warnings or selective cancellation or redirection of flights) could materially and adversely affect the Company and the airline industry. The wars in Iraq and Afghanistan and additional international hostilities, including heightened terrorist activity, could also have a material adverse impact on the Company’s financial condition, liquidity and results of operations. The Company’s financial resources might not be sufficient to absorb the adverse effects of any further terrorist attacks or other international hostilities involving the United States or U.S. interests.

The U.S. airline industry is characterized by substantial price competition, especially in domestic markets.competition. Some of our competitors have substantially greater financial resources or lower-costlower cost structures than United does, or both. In recent years, the market share held by low-cost carriers has increased significantly. Large network carriers, like United, have often had a lack of pricing power within domestic markets.

In addition, a number of carriers have filed for bankruptcy protection.protection in recent years. Other domestic and international carriers could restructure in bankruptcy or threaten to do so to reduce their costs. Carriers operating under bankruptcy protection can operate in a manner that could be adverse to the Company and could emerge from bankruptcy as more vigorous competitors.

During 2008, the U.S. airline industry underwent consolidation with the merger of Delta Airlines Inc. and Northwest Airlines. In 2009, regional mainline carriers Midwest Airlines and Frontier Airlines were acquired by Republic Airways, and Frontier Airlines remains a direct competitor of United at its Denver hub. In early 2010, foreign carrier Japan Airlines filed for bankruptcy and began restructuring its business.

There is ongoing speculation that further airline industry consolidation could occur in the future. United routinely monitors changes in the competitive landscape and engages in analysis and discussions regarding its strategic position, including alliances, asset acquisitions and

United and certain of its competitors announcedimplemented significant capacity reductions during 2008.in 2008 and 2009. The CompanyCompany’s unit revenues may not achieve necessary increases in unit revenue frombe favorably impacted by the announced capacity reductions and its unit costs may be adversely impacted by capacity reductions.impacted. Further, certain of the Company’s competitors may not reduce capacity or may increase capacity, thereby diminishing ourthe expected benefit to the Company from capacity reductions. The poor economic environment may have an adverse impact on travel demand, which may result in a negative impact on revenues.

Since September 11, 2001, the DHS and the Transportation Security Administration have implemented numerous security measures that affect airline operations and costs and are likely to implement additional measures in the future. In addition, foreign governments have also instituted additional security measures at foreign airports United serves. A substantial portion of the costs of these security measures is borne by the airlines and their passengers, increasing the Company’s costsand/or reducing its revenue and traffic. Additional measures taken to enhance either passenger or cargo security proceduresand/or to recover associated costs in the future may result in similar adverse effects on United’s results of operations.

Airlines are subject to extensive regulatory and legal compliance requirements that result in significant costs. In addition to the enactment of the Aviation and Transportation Security Act, laws, regulations, taxes and airport rates and charges have been proposed from time to time that could significantly increase the cost of airline operations or reduce airline revenue. The FAA from time to time also issues directives and other regulations relating to the maintenance and operation of aircraft that require significant expenditures by United. The Company expects to continue incurring material expenses to comply with the regulations of the FAA and other agencies.

United operates under a certificate of public convenience and necessity issued by the DOT. If the DOT altered, amended, modified, suspended or revoked our certificate, it could have a material adverse effect on the Company’s business. The FAA can also limit United’s airport access by limiting the number of departure and arrival slots at “highhigh density traffic airports”airports and local airport authorities may have the ability to control access to certain facilities or the cost of access to such facilities, which could have an adverse effect on the Company’s business.

In addition, access to landing and take-off rights, or “slots”“slots,” at several major U.S. airports and many foreign airports served by United are, or recently have been, subject to government regulation. As passenger travel has continued to increase in recent years, many U.S. and foreign airports have become increasingly congested. Certain of United’s major hubs are among the more congested airports in the U.S.United States and have been or could be the subject of regulatory action that might limit the number of flightsand/or increase costs of operations at certain times or throughout the day.

In addition, the Company’s operations may be adversely impacted due to the existing outdated air traffic control (“ATC”) system utilized by the U.S. government. During peak travel periods in certain markets the current ATC system’s inability to handle existing travel demand has led to short-term capacity constraints imposed by government agencies, as discussed above, and has also resulted in delays and disruptions of traffic using the ATC system.air traffic. In addition, the current system will not be able to effectively handle projected future air traffic growth. Therefore, imposition of these ATC constraints on

The Company has been subject to federal, state and local taxes and fees that increase the cost of the Company’s operations. In addition to taxes and fees that the Company is currently subject to, proposed taxes and fees are currently pending. If any of these additional taxes and fees were to be imposed on the Company, they would increase the Company’s operating expenses.

Many aspects of United’s operations are also subject to increasingly stringent federal, state and local laws protecting the environment. Future environmental regulatory developments, such as in regard to climate change, in the U.S.United States and abroad could adversely affect operations and increase operating costs in the airline industry. There are a fewSome climate change laws and regulations that have gone into effect that apply to United, including environmental taxes for certain international flights some(including the United Kingdom’s Air Passenger Duty), limited greenhouse gas reporting requirements and some land-based planning laws which could apply to airports and ultimately impactcould affect airlines depending uponin certain circumstances. Other areas of developing regulations include the circumstances.State of California rule-making regarding air emissions from ground support equipment and federal rule-makings concerning the discharge of deicing fluid and the regulation of aircraft drinking water supplies. In addition, thea 2009 EU has adoptedDirective required EU member countries to enact legislation tothat would include aviation within the EU’s existing greenhouse gas emissioncarbon emissions trading scheme, effective in 2012. There are significant questions that remain as to theThe legality of applying thesuch a scheme to non-EU airlines has been widely questioned. In December 2009, the Air Transportation Association, joined by United, Continental and American Airlines, filed a lawsuit in the United Kingdom challenging regulations that transpose into UK law the EU emissions trading scheme as applied to U.S. and other governmentscarriers. In addition, non-EU countries are considering filing a legalformal challenge before the United Nations’ International Civil Aviation Organization with respect to the EU’s unilateral inclusion of non-EU carriers. WhileIt is not clear whether the trading scheme would withstand such a measurechallenges. If the scheme is found to be valid, however, it could significantly increase the costs of carriers operating in the EU (by requiring the purchase of carbon credits), although the precise cost to United is difficult to calculate with any certainty due to a number of variables, and it is not clear whetherwill depend, among other things, on United’s carbon emissions from flights to and from the scheme will withstand legal challenge. ThereEU, and the price of carbon credits. Actions also may be taken in the future regulatory actions taken by the U.S. government, state governments within the U.S.,United States, foreign governments, the International Civil Aviation Organization, or by signatory countries through a new global climate change treaty to regulate the emission of greenhouse gases by the aviation industry. Such future regulatory actions are uncertain at this time (in termsThe precise nature of either the regulatoryany such requirements orand their applicability to United),United are difficult to predict, but the impact to the Company and itsthe aviation industry would likely be adverse and could be significant, including the potential for increased fuel costs, carbon taxes or fees, or a requirement to purchase carbon credits.

The ability of U.S. carriers to operate international routes is subject to change because the applicable arrangements between the United States and foreign governments may be amended from time to time, or because appropriate slots or facilities may not be made available. United currently operates on a number of international routes under government arrangements that limit the number of carriers, capacity or the number of carriers allowed access to particular airports. If an open skies policy were to be adopted for any of these routes, such an event could have a material adverse impact on the Company’s financial position and results of operations and could result in the impairment of material amounts of related tangible and intangible assets.

The Company’s plans to enter into or expand antitrust immunized joint ventures for various international regions, involving Continental, United and other members of the Star Alliance are subject to receipt of approvals from applicable nationalfederal authorities or otherwise satisfying applicable regulatory requirements, and there can be no assurances that such approvals will be granted or applicable regulatory requirements will be satisfied. In December 2009, the Company and Continental applied jointly with All Nippon Airways to the DOT for immunity from U.S. antitrust laws for a series of alliance agreements between and among the carriers, including a transpacific joint venture, which is currently pending approval from the DOT. Other air carriers are also seeking to initiate or expand antitrust immunity for joint ventures which, if approved, couldmay adversely affect the Company’s financial position and results of operations.

Further, the Company’s operations in foreign countries are subject to a variety of laws and regulations in those countries. The Company cannot provide any assurance that current laws and regulations, or laws or regulations enacted in the future, will not adversely affect its financial condition or results of operations.

Due to greater demand for air travel during the spring and summer months, revenues in the airline industry in the second and third quarters of the year are generally stronger than revenues in the first and fourth quarters of the year. The Company’s results of operations generally reflect this seasonality, but have also been impacted by numerous other factors that are not necessarily seasonal including, among others, the imposition of excise and similar taxes, extreme or severe weather, air traffic control congestion, changes in the competitive environment due to industry consolidation and other factors and general economic conditions. As a result, the Company’s quarterly operating results are not necessarily indicative of operating results for an entire year and historical operating results in a quarterly or annual period are not necessarily indicative of future operating results.

In accordance with Statement of Financial Accounting Standards No. 142,Goodwill and Other Intangible Assets(“SFAS 142”) and Statement of Financial Accounting Standards No. 144,Accounting for the Impairment or Disposal of Long-Lived Assets,(“SFAS 144”),applicable accounting standards, the Company is required to test certain of its indefinite-lived intangible assets for impairment on an annual basis on October 1 of each year, or more frequently if conditions indicate that an impairment may have occurred. In addition, the Company is required to test certain of its tangibleother assets for impairment if conditions indicate that an impairment may have occurred.

During the second quarter ofyears ended December 31, 2009 and 2008, the Company performed an interim impairment testtests of its goodwill, all indefinite-livedcertain intangible assets and certain of its long-lived assets (principally aircraft, and related spare engines and spare parts). The interim impairment tests were due to events and changes in circumstances that indicated an impairment might have occurred. FactorsThe primary factors deemed by management to have collectively constituted a potential impairment triggering event includedwas, in 2009, a significant decrease in actual and forecasted revenues, and in 2008, record high fuel prices, significant losses, in 2008, a softening U.S. economy, analyst downgrade of UAL common stock, rating agency changes in outlook for the Company’s debt instruments from stable to negative, the announcement in 2008 of the planned removal from UAL’s fleet of 100 aircraft and a significant decrease in the fair value of the Company’sUAL’s outstanding equity and debt securities, during 2008, including a decline in UAL’s market capitalization to significantly below book value.

As a result of the impairment testing performed in the second and fourth quarters of 2008,described above, the Company recorded goodwill and tangible and intangible asset impairment charges totalingof approximately $243 million and $2.6 billion during 2008.the years ended December 31, 2009 and 2008, respectively. The Company determined that goodwill was completely impaired.impaired in 2008. However, as of December 31, 2009, the Company still has book values at December 31, 2008 ofhad approximately $10.3$9.8 billion of operating property and equipment and $2.7$2.5 billion of intangible assets that could be subject to future impairment charges. WeThe Company may be required to recognize additional impairments in the future due to, among other factors, extreme fuel price volatility, tight credit markets, a decline in the fair value of certain tangible or intangible assets, unfavorable trends in historical or forecasted operating orresults of operations and cash flow lossesflows and the uncertain economic environment, as well as other uncertainties. The Company can provide no assurance that a material impairment charge of tangible or intangible assets will not occur in a future period. The value of our aircraft could be impacted in future periods by changes in the marketsupply and demand for these aircraft. Such changes could result in a greater supply and lower demand for certain aircraft types ascould result from grounding of aircraft by the Company or other

The Company continues to identify and implement improvement programs to enhance the delivery of its products and services to its customers, reduce its costs and increase its revenues. In response to the unprecedented increase in fuel prices during 2008 and the weakeningweakened U.S. and global economies, the Company beganhas been implementing certain operational plans.plans in line with its “Focus on Five” operating agenda. The Company’s efforts are focused on cost savings in areas such as telecommunications, airport services, catering, maintenance materials, aircraft ground handling and regional affiliatesRegional Affiliates expenses, among others. In addition, the Company is significantly reducing mainlinereduced Mainline domestic and consolidated capacity and is removingremoved 100 aircraft from its mainlineMainline fleet, including its entire B737 fleet of 94 aircraft and six B747 aircraft. United is also eliminatingeliminated its Ted product and reconfiguringreconfigured that fleet’s 56 A320s to include United First class seats. See Item 7,Management’s Discussion and Analysis of Financial Condition and Results of Operationsfor further information regarding the Company’s capacity reductions. The Company will continue to review the deployment of all of our aircraft in various markets and the overall composition of our fleet to ensure that we are using our assets appropriately to provide the best available return. In connection with the capacity reductions, the Company is further streamliningstreamlined its operations and corporate functions in order to match the size of its workforce to the reduced size of its operations. The Company currently estimates a reduction ofreduced its workforce by approximately 9,000 positions during 2008 and 2009, through a combination of furloughs and furlough-mitigation plans, such as early-out options. There can be no assurance that the Company’s initiatives to reduce costs and increase revenues will be successful.

The Company is taking additional actions beyond the operational plans discussed above, including increased cost reductions, new revenue sources and other actions. Certain of the Company’s plans to improve its performance require the use of significant cash for such items as severance payments, lease termination fees, conversion of Ted aircraft and facility closure costs, among others. The Company is also reviewing strategic alternatives to maximize the value of its assets and its businesses, which may include a possible sale of all, or part of, these assets or operations. There can be no assurance that any transactions with respect to these assets or operations will occur, nor are there any assurances with respect to the form or timing of any such transactions or their actual effect on shareholder value. A number of the Company’s ongoing initiatives involve significant changes to the Company’s business that it may be unable to implement successfully. In addition, revenue and other initiatives may not be successful due to the competitive landscape of the industry and the reaction of our competitors to certain of our initiatives. The adequacy and ultimate success of the Company’s programs and initiatives to improve the delivery of its products and services to its customers, reduce its costs and increase both its revenues and shareholder value cannot be assured.

Approximately 83%82% of the employees of UAL are represented for collective bargaining purposes by U.S. labor unions. These employees are organized into six labor groups represented by six different unions.

Relations between air carriers and labor unions in the United States are governed by the RLA. Under the RLA, a carrier must maintain the existing terms and conditions of employment following the amendable date through a multi-stage and usually lengthy series of bargaining processes overseen by the National Mediation Board (“NMB”).NMB. This process continues until either the parties have reached agreement on a new collective bargaining agreement or the parties are released to “self-help” by the NMB. Although in most circumstances the RLA prohibits strikes, shortly after release by the NMB, carriers and unions are free to engage in self-help measures such as strikes and lock-outs. All six of the

The terrorist attacks of September 11, 2001 led to a significant increase in insurance premiums and a decrease in the insurance coverage available to commercial airlines. Accordingly, the Company’s insurance costs increased significantly and its ability to continue to obtain certain types of insurance remains uncertain. The Company has obtained third-party war risk (terrorism) insurance through a special program administered by the FAA, resulting in lower premiums than if it had obtained this insurance in the commercial insurance market. Should the government discontinue this coverage, obtaining comparable coverage from commercial underwriters could result in substantially higher premiums and more restrictive terms, if it is available at all. If the Company is unable to obtain adequate war risk insurance, its business could be materially and adversely affected.

If any of United’s aircraft were to be involved in an accident, the Company could be exposed to significant liability. The insurance it carries to cover damages arising from any future accidents may be inadequate. If the Company’s insurance (including, but not limited to, aviation, hull and liability insurance and property insurance) is not adequate,inadequate, it may be forced to bear substantial losses from an accident.

The Company depends on automated systems to operate its business, including its computerized airline reservation systems, flight operations systems, telecommunication systems and commercial websites, including united.com.www.united.com. United’s website and reservation systems must be able to accommodate a high volume of traffic and deliver important flight and schedule information, as well as process critical financial transactions. Substantial or repeated website, reservations systems or telecommunication systems failures could reduce the attractiveness of United’s services versus its competitors and materially impair its ability to market its services and operate its flights.

The Company has engaged a growing number of third-party service providers to perform a large number of functions that are integral to its business, such as operation of United Express flights, operation of customer service call centers, provision of information technology infrastructure and services, provision of aircraft maintenance and repairs, provision of various utilities and performance of aircraft fueling operations, among other vital functions and services. The Company does not directly control these third-party providers, although it does enter into agreements with many of them that define expected service performance. Any of these third-party providers, however, may materially fail to meet their service performance commitments to the Company. The failure of these providers to adequately perform their service obligations, or other unexpected interruptions of services, may reduce the Company’s revenues and increase its expenses or prevent United from operating its flights and providing other services to its customers. In addition, the Company’s business and financial performance could be materially harmed if its customers believe that its services are unreliable or unsatisfactory.

The Company has a significant amount of financial leverage from fixed obligations, including its amended credit facility,Amended Credit Facility, aircraft lease and debt financings, leases of airport property and other facilities, and other

material cash obligations. In addition, as of December 31, 2008,2009, the Company had pledged a substantial amount of its assets as collateral to secure its various fixed obligations. The Company’s high level of fixed obligations, a downgrade in the Company’s credit ratings, or poor credit market conditions and the Company’s limited amount of unencumbered assets available as collateral for loans or other indebtedness could impair itsthe Company’s ability to obtain additional financing, if needed, and reduce its flexibility to conduct its business. Certain of the Company’s existing indebtedness also requiresrequire it to meet covenants and financial tests to maintain ongoing access to those borrowings. See Note 12,11, “Debt Obligations and Card Processing Agreements,” and Note 21, “Subsequent Events,” inCombined Notes to Consolidated Financial Statements the Footnotes for further details related to the Company’s credit agreements and assets pledged as collateral.collateral, as well as additional debt issued during early 2010. A failure to timely pay its debts or other material uncured breachbreaches of its contractual obligations could result in a variety of adverse consequences, including the acceleration of the Company’s indebtedness, the withholding of credit card sale proceeds by its credit card service providers and the exercise of other remedies by its creditors and equipment lessors that could result in material adverse effects on the Company’s operationsfinancial position and financial condition.results of operations. In such a situation, it is unlikely that the Company would be able to fulfill its obligations to repay the accelerated indebtedness, make required lease payments, or otherwise cover its fixed costs.

As of December 31, 2008,2009, the Company had a net operating loss (“NOL”) carry forward tax benefit of approximately $2.6$2.7 billion for federal and state income tax purposes that primarily originated before UAL’s emergence from bankruptcy andwhich will expire over a five to twenty year period. This tax benefit is mostly attributable to federal pre-tax NOL carry forwards of $7.0$7.3 billion. If the Company were to have a change of ownership within the meaning of Section 382 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), under certain conditions, its annual federal NOL utilization could be limited to an amount equal to its market capitalization at the time of the ownership change multiplied by the federal long-term tax exempt rate.rate, adjusted for certain built-in gains or losses. A change of ownership under Section 382 of the Internal Revenue Code is defined as a cumulative change of more than 50 percentage points or more in the ownership positions of certain stockholders owning 5% or more of the Company’sUAL’s common stock over a three year rolling period.

To reduce the risk of a potential adverse effect on the Company’s ability to utilize its NOL carry forwardforwards for federal income tax purposes, UAL’s amended and restated certificate of incorporation contains a 5% ownership limitation (the “5% Ownership Limitation,”Limitation”), applicable to all stockholders except the Pension Benefit Guaranty Corporation (“PBGC”). The 5% Ownership Limitation remains effective until February 1, 2011.2011, subject to further extension by the UAL Board of Directors (the “Board of Directors”) and shareholders. The 5% Ownership Limitation prohibits (i) the acquisition by a single stockholder of shares representing 5% or more of the common stock of UAL Corporation and (ii) any acquisition or disposition of common stock by a stockholder that already owns 5% or more of UAL Corporation’sUAL’s common stock, unless prior written approval is granted by the UAL Board of Directors. The percentage ownership of a single stockholder can be computed by dividing the number of shares of common stock held by the stockholder by the sum of the shares of common stock issued and outstanding plus the number of shares of common stock still held in reserve for payment to unsecured creditors under the Debtors’ Second Amended Joint Plan of Reorganization.Reorganization pursuant to Chapter 11 of the U.S. Bankruptcy Code (the “Plan of Reorganization”). For additional information regarding the 5% Ownership Limitation, please refer to UAL’s restated certificate of incorporation available on its website.

While the purpose of these transfer restrictions is to prevent a change of ownership from occurring within the meaning of Section 382 of the Internal Revenue Code (which ownership change might materially and adversely affect the Company’s ability to utilize its NOL carry forward or other tax attributes), no assurance can be given that such an ownership change will not occur, in which case the availability of the Company’s substantial NOL carry forward and other federal income tax attributes might be significantly limited or possibly eliminated. Any transfers of common stock that are made in violation of the restrictions set forth above will be void and, pursuant to UAL’s restated certificate of

The Company is a global business with operations outside of the United States from which it derives approximately one-third of its operating revenues, as measured and reported to the DOT. The Company’s operations in Asia, Latin America, the Middle East and Europe are a vital part of its worldwide airline network. Volatile economic, political and market conditions in these international regions may have a negative impact on the Company’s operating results and its ability to achieve its business objectives. In addition, significant or volatile changes in exchange rates between the U.S. dollar and other currencies, and the imposition of exchange controls or other currency restrictions, may have a material adverse impact upon the Company’s liquidity, revenues, costs and operating results.

An outbreak of a disease that affects travel demand or travel behavior, such as Severe Acute Respiratory Syndrome, (“SARS”)avian flu or avian flu,H1N1 virus, or other illness, could have a material adverse impact on the Company’s business, financial condition and results of operations.

Certain provisions of the amended and restated certificate of incorporation and amended and restated bylaws of UAL (the(together, the “Governance Documents”) may make it difficult for stockholders to change the composition of UAL’sthe Board of Directors and may discourage takeover attempts that some of its stockholders may consider beneficial.

Certain provisions of the Governance Documents may have the effect of delaying or preventing changes in control if UAL’sthe Board of Directors determines that such changes in control are not in the best interests of UAL and its stockholders.

These provisions of the Governance Documents are not intended to prevent a takeover, but are intended to protect and maximize the value of UAL’s stockholders’ interests. While these provisions have the effect of encouraging persons seeking to acquire control of UAL to negotiate with the UAL Board of Directors, they could enable the Board of Directors to prevent a transaction that some, or a majority, of its stockholders might believe to be in their best interests and, in that case, may prevent or discourage attempts to remove and replace incumbent directors.

In connection with the Company’s emergence from Chapter 11 bankruptcy protection,Plan of Reorganization, UAL is obligated under an indenture to issue to the PBGC 8% senior unsecured notesContingent Senior Notes (the “8% Notes”) with an aggregate principal amount of up to $500 million in up to eight equal tranches of $62.5 million (with no more than one tranchetwo tranches issued as a result of each issuance trigger event) upon the occurrence of certain financial triggering events. An issuance trigger event occurs when, among other things, the Company’s EBITDAR (as defined in the PBGC indenture) exceeds $3.5 billion over the prior twelve months ending June 30 or December 31 of any applicable fiscal year, beginning with the fiscal year endingended December 31, 2009 and ending with the fiscal year ending December 31, 2017. However, if the issuance of a tranche would cause a default under any

The following table presents repurchases of UAL common stock made in the fourth quarter of fiscal year 2008:

In connection with its emergence from Chapter 11 bankruptcy protection, UAL adopted fresh-start reporting, effective February 1, 2006, in accordance withSOP 90-7 and in conformity with accounting principles generally accepted in the United States of America (“GAAP”)related to reorganizations. As a result of the adoption of fresh-start reporting, the financial statements prior to February 1, 2006 are not comparable with the financial statements after February 1, 2006. References to “Successor Company” refer to UAL on or after February 1, 2006, after giving effect to the adoption of fresh-start reporting. References to “Predecessor Company” refer to UAL prior to February 1, 2006.